Shirley Kistler's Real Estate Blog: Serving your Real Estate Needs in Sacramento, Placer and El Dorado Counties

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With married couples comprising less than 50% of all US households, home buyers are changing.  A growing number of non-family households, according to a report from John Burns Real Estate Consulting are on the increase.  Non-family households where no one is related to the house holder have increased nearly five times in the last 50 years from 7.9 to 39.2 million. 

A lot of non-family households are looking at SMALL HOMES: preferring a home under 2500 sf with three or fewer bedrooms.  LOCATION:  the proximity to work and entertainment over home size and they are less interested in media rooms and pools.

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Governor Brown signed Assembly Bill 771, on September 1, 2011.  This bill prevents home buyers in a common interest development, such as a condominium or townhome, from being charged excess document fees. 

Current law requires this information come from the Homeowner’s Association “HOA” and prohibits it from charging fees in excess of what is “reasonable,” not to exceed the actual cost of processing and producing these documents.  HOA generally have provided the document for approximately $75 to $250.  In the past HOAs have been delegating document preparation to third party vendors or contractors who, under a 2007 court decision, are exempt from this fee limitation.  This delegation of responsibility by HOAs sometimes resulted in home purchasers being forced to pay additional fees, as much as $1000, for other documents which were “bundled” with the required documents. 

AB 771 addresses this by specifying that only fees for the required documents may be charged when such documents are provided, effectively prohibiting any “bundling” of fees for other documents with these fees.  The bill also creates a new form detailing which documents are required, and requires the provider to disclose the fees that will be charged for the documents before they are provided.  The seller of the home must complete this form and transmit it to the prospective purchaser along with the required documents.  This will eliminate any uncertainty for the prospective purchase as to exactly which documents are being provided and the precise fees being charged in those documents. 

A recent survey conducted by FindLaw.com a legal information website found that 60% of Americans believe that it is “never OK” for homeowners to simply stop making payments on their mortgages.  34% say it’s OK for homeowners to walk away from mortgages, but only if they aren’t able to make the monthly payments.  Only 3% believe that homeowners should be able to walk away from their mortgage anytime they want. 

Before making any major decisions, homeowners should consult with financial and legal professionals, including accountants, real estate attorneys and financial advisors.  Any major change to a mortgage situation could lead to serious and unanticipated consequences involving taxes, contract law, credit scores, ability to borrow in the future, potential for lawsuits and much more.

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 1)      Obtain a Home Inspection – The house may look great on the surface but might have hidden problems which could require expensive repairs.  On the other hand, a fixer may look bad but could have excellent bones that can be repaired at a reasonable cost.  Even if the listing agent has previous inspections and reports that may be a few months old, you may want to still consider having a new inspection as a sitting home can deteriorate a bit. 

2)      Use Common Real Estate Logic – Too many people focus on price alone.  You need to keep in mind sub-par locations, poor lighting, terrible views, below average school district, high crime rates and other negatives that may be another reason why a home went into foreclosure.  You should always try to find out how long the home has been empty; the longer it has, the more of chance it may not be a good deal.  Also, if there are other foreclosures nearby, that may be a reason for concern. 

3)      Rethink or Skip the Flip – Even if the house looks like a great flipping opportunity, beware unless you are a pro, with incredible contractor connections.  You may want to triple the amount you think you will be spending to fix up the home.  Sometimes the temptation to make fast money doesn’t always pan out, so think it through and speak to a real estate professional and contractors. 

4)      Go over the Budget – A fixer-upper means nothing if you can’t afford to fix it up.  Make sure you have an ample budget to do all of the repairs needed.

 5)      See the house in person – You should never buy a house without going in person to see it.

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Protect your home and family now!

California residents must have carbon monoxide detectors in their homes as of July 1, 2011.  This timeline applies only to single-family homes that have appliances that burn fossil fuels (wood, gas and oil) or homes that have attached garages or fireplaces.  For all other types of housing, such as apartments and hotels, detectors should be in place as of January 1, 2013. 

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Are you trying to decide whether to sell your home on your own or hire a Realtor?  Check out this survey to help you make a decision:

Homegain.com conducted a survey on selling your home: For Sale by Owner “FSBO” vs. REALTOR_®.  Homeowners were asked whether they used a REALTOR_® to sell their home or whether they attempted to sell it themselves. 

83% said they used a REALTOR_® and 17% tried on their own.

59% of homeowners that used a REALTOR_®  to sell their house were successful vs. 39% of the FSBO’s reflecting a 50% higher closing rate for those using a REALTOR_®  

81% of the homeowners that used a REALTOR_® to try and sell their homes said they would use a REALTOR_®  again for their Real Estate needs.

88% of the homeowners that used a REALTOR_® to try and sell their homes said they would use a REALTOR_®  again.

71% of FSBO’s who managed to sell their home on their own said they would try and sell their home on their own again.

The survey also pointed out that 24% of FSBO’s eventually enlisted the aid of a REALTOR_®

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There are some tax benefits in purchasing a home vs. renting.  You should speak with a bona fide tax professional and have a tax professional run the numbers to find out what benefits you may qualify for. 

Purchasing a Home: 

Home Mortgage Interest Deduction:  At this time, the interest paid on a mortgage or mortgage of up to $1 million for a principal resident and/or second home is deductible as an itemized deduction.   

Home Equity Loan Deduction:  Homeowners can borrow up to $100,000 against the equity in their home and deduct the interest as an itemized deduction.  The money can be used for any purpose, such as paying off high-interest credit card debt.  Credit card interest is not deductible. 

Property Tax Deduction:  Homeowners also get to deduct from their federal income taxes the state and local property taxes they pay on their home. 

Deductible home buying expenses:  Various closing costs ordinarily involved in a home purchase are also deductible as itemized deductions, including points, prorated interest and taxes. 

$250,000/$500,000 home-sale exclusion:  Perhaps the greatest tax benefit of owning a home comes when a person sells it at a profit.  Homeowners who lived in their home for two of the prior five years prior to its sale need pay no income tax on a substantial amount of their profit – $250,000 for single homeowner’s and $500,000 for married homeowners who file jointly.  This exclusion can be used once every 24 months. 

14 days of free rental income:  Another little known tax benefit of owning a home is that the owner can rent it out for up to 14 days during the year and pay no tax at all on the rental income.   

Renting a home: 

Home Office deduction:  The only tax benefit that a renter can qualify for by virtue of being a renter is the home office deduction.  This is a business deduction available to renters who own a business and have a home office they use regularly and exclusively for business purposes. 

Of course, the value of the tax benefits of buying a home depends on the state the buyer live in and their tax bracket.  Buyers who live in high tax states like New York or California get the most benefit.  

Source:  Inman News and Stephen Fishman

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Despite the rising number of renters in the U.S., it is cheaper to buy a home rather than rent one in 72% of the 50 largest cities according to an index released by Trulia.com. 

Trulia’s rent vs. buy index compares the median list price with the median rent on two bedroom apartments, town homes & condominiums listed on Trulia.com as of 1/10/11. 

In 36 out of 50 of the country’s most populous cities, buying a two-bedroom home is less expensive than renting one.  These cities also include many areas that have been hit hard by foreclosures, such as Sacramento.

A price-to-rent ratio of 1 to 15 means that it’s much cheaper to buy than to rent in a particular city.  A ratio between 16 and 20 means that it’s more expenseive to rent than to buy, but depending on the family’s situation, buying could “make financial sense” the side siad.  Any ratio above 20 indicates that owning is much more costly than renting in a city.

Top 10 cities to buy vs. rent:

Source: Trulia

In 10 cities, renting is cheaper, but buying might make more financial sense, according to Trulia. These cities include Los Angeles, Boston, and Fort Worth, Texas.

The index considers the total cost of homeownership compared to the total cost of renting. Calculations for the total cost of homeownership include mortgage principal and interest, property taxes, hazard insurance, closing costs at time of purchase, homeowners association dues, and private mortgage insurance. The homeownership cost calculation also includes tax advantages from mortgage interest, property tax and closing-cost deductions.

Calculations for total rental cost include rent and renters insurance.

The total cost of homeownership was highest, compared to the cost to rent, in New York; Seattle; Kansas City, Mo.; and San Francisco.

Top 10 cities to rent vs. buy:

Source: Trulia

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Effective January 1, 2011, California first trust deed mortgage holders who consent to a short sale of residential property (up to 4 units) are prohibited from seeking a deficiency judgment for the difference between the mortgage balance and proceeds realized through the sale. 

Senate Bill931 was passed by legistature in August and approved by the Governor on 9/30/10 to help strapped homeowners.

See the complete article at Realty Times 

The following tips will help you make a great first impression when putting your home on the market.  People decide within 30 seconds of walking into a home whether they might want to buy it, so it is important to make a great first impression.

Curb Appeal

Spend a little money on gardening by cutting overgrown shrubs and weeds and planting new shrubs or flowers.  A bit of gardening can help paint a scene, so buyers can see their kids playing in the yard or can imagine entertaining in the back yard.

Condition of the Home

Make necessary repairs to the home before putting it on the market.  Look for cracks, damaged paint and so on to repair.  Not making repairs can cut the price of the house.

Buyer’s typically ask for $2-$3 off the price for every $1 of repairs that they perceive are needed, so it is crucial for sellers to know that, say, the roof needs to be replaced.  That way, the seller can spend the $5,000 themselves rather than face a buyer demand $10,000-$15,000 off the price of the house.

 Clean and organize the house – including drawers, cabinets & closets.  It’s a good idea to de-clutter these areas so it doesn’t appear that there isn’t enough room in the home. 

Finding the right assistance

Contact a Realtor who often provides their expertise in giving you tips to get your home ready for sale.  They also often provide a list of Handymen, Home Stagers, Painters and Roofers that can assist you in getting your home ready for sale.

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